Intro. To Econ.Key terms and phrases

Economics Vocabulary Homework

1.) Copy down each of the assigned vocabulary words and definitions. Then leave 5-7 line spaces underneath the word and definition during class lecture today.

2.) Provide a well thought out, thorough, reasonable, and logical real life example of the vocabulary term. You can use yourself as the subject in the example. If an example of the term is impossible, then write a sentence using the term in a meaningful way. (Show me you understand the meaning of the word.) 3pts each

3.) Draw or provide an image of each vocabulary term 3pts each

4.) This assignment is worth 150 points…the actual vocabulary test is worth 125 points. So, do your homework!!!

1.) Need: A physiological or biological requirement for maintaining life (survival) , such

as the need for air, water, food, shelter, and sleep

Your Example:

Your image:

2.) want: A psychological/physical desire which makes life more enjoyable, but which

is not essential to sustain life (survival).

Your Example:

Your image:

3.) economics: the study of how people seek to satisfy their needs and wants

by making choices Your Example: Your image:

4.) goods physical, tangible products/objects used to satisfy people's wants and

needs.

Your Example:

Your image:

Goods Good – tangible economic product

that is useful, relatively scarce, transferable to others; used to satisfy wants and needs.

Consumer good – good intended for final use by consumers rather than business

Capital good – manufactured good used to produce other goods and services

Durable good – good that lasts more than three years when used regularly (>3 years)

Nondurable good – item that lasts for less than three years when used regularly; can be a capital or a consumer good (<3 years)

Consumer or Capital?

Non-Durable or Durable?

5.) services: An activity or action that provides direct satisfaction of wants

and needs without the production of a tangible product or good. (that you can’t drop on your foot, ranging from hairdressing to websites)

Your Example: Your image:

Serviceswork or labor performed for someone; economic product that includes haircuts, home repairs, forms of entertainment

6.) scarcity: A condition of human existence that exists because

society has unlimited wants and needs, but limited resources used for their satisfaction. In other words,

while we all want a bunch of stuff, we can't have everything that we want. In slightly different words, this scarcity problem means: (1) that there's never enough resources to produce everything that everyone would like produced; (2) that some people will have to do without some of the stuff that they want or need; (3) that doing one thing, producing one good, performing one activity, forces society to give up something else; and (4) that the same resources can not be used to produce two different goods at the same time.

We live in a big, bad world of scarcity. This big, bad world of scarcity is what the study of economics is all about.

That's why we usually subtitle scarcity: THE ECONOMIC PROBLEM. Your Example: Your image:

7.) allocation:

The process of distributing resources for the production of goods and services, and of distributing goods and services for consumption by households. This process of allocation is essential to an economy's effort to address the problem of scarcity. An allocation is efficient if the resources, goods, and services are distributed according to the economy's highest valued uses.

Your Example:

Your image:

8.) shortage (not to be confused with scarcity) The situation resulting when the quantity demanded

exceeds the quantity supplied of a good or service, They occur when producers will not or cannot offer goods or services at the current prices.

Can be temporary of long-term.

During a holiday season, I might find the shelves empty of “Air Jordans” on Wednesday, but return on Friday to find that the same shelf filled with plenty of “Air Jordans” to meet the demand of all the customers looking to buy “Air Jordans” that day.

Not having enough of one brand of soda in the store on a Saturday because of a sale on soda is another example of shortage.

usually because the price is for some reason below the equilibrium price (The market clearing price at which the quantity demanded by buyers equals the quantity supplied by sellers) in the market.

Your Example:

Your image:

9.) Factors of Production: Resources used by businesses to produce goods and

services; the ingredients of economic activity: land, labor, capital and entrepreneurship (enterprise): (The creative juices of CAPITALISM; the ANIMAL SPIRITS of the ENTREPRENEUR).

Your Example:

Your image:

10.) land All natural resources or gifts of nature that are used to produce goods and services. One

of four basic categories of resources, or factors of production

The other three are labor, capital, and entrepreneurship.

This category includes the natural resources used to produce goods and services, including the land itself; the minerals and nutrients in the ground; the water, wildlife, and vegetation on the surface; and the air above.

Pending colonization of the moon, it is in fairly fixed SUPPLY. Marginal increases are possible by reclaiming land from the sea and cutting down forests (which may impose large economic costs by damaging the environment), but the expansion of deserts may slightly reduce the amount of usable land.

Owners earn MONEY from land by charging RENT.

Your Example:

Your image:

11.) labor: The services and efforts of humans that are used for production for which a

person is paid. One of the four basic categories of resources, or factors of production

The other three are capital, land, and entrepreneurship.

While labor is commonly thought of as those who work in factories, it includes all human efforts (except entrepreneurship),

such as those provided by clerical workers, technicians, professionals, managers, and even company presidents.

Your Example:

Your image:

12.) capital Any money, assets, and human made resource (All buildings, equipment and

human skills ) that is used to produce other goods and services. One of the four basic categories of resources, or factors of production

The life-blood of CAPITALISM. Economists describe capital as one of the four essential ingredients of economic activity, the FACTORS OF PRODUCTION, along with LAND, LABOUR and ENTERPRISE (entrepreneurship)

Common examples of capital are the factories, buildings, trucks, tools, machinery, and equipment used by businesses in their productive pursuits.

Capital's primary role in the economy is to improve the productivity of labor as it transforms the natural resources of land into wants-and-needs-satisfying goods.

Your Example:

Your image:

13.) physical capital Human-made objects used to create other goods and services; capital

goods

Manufactured items used to produce goods and services.

Includes buildings and tools.

A shoe factory building and all of the sewing machines and other specialized machinery for making shoes make up part of the shoe company’s physical capital.

Your Example:

Your image:

14.) Financial capital money used by entrepreneurs and businesses to buy what they need to

make their products or provide their services

These are also termed paper assets.

Your Example:

Your image:

15.) Human capital The knowledge and skills a worker gains through education and

experience. The health, strength, education, training, and skills which people bring to their jobs

The sum total of a person's productive knowledge, experience, and training.

The acquisition of human capital is what makes a person more productive.

One of the most notable methods of stocking up on human capital is through formal education--from grade school to advanced college degrees.

However, human capital is also effectively obtained through less formal training and highly informal on-the-job experiences.

Human capital continued…

In other words, Human capital is the stuff that enables people to earn a living. Human capital can be increased by investing in education, training and health care.

Economists increasingly argue that the accumulation of human as well as physical CAPITAL (plant and machinery) is a crucial ingredient of economic GROWTH, par ticularly in the NEW ECONOMY.

Your Example: Your image:

16.) entrepreneurship

A special sort of human effort that takes on the risk of bringing labor, capital, and land together and organizing production.

The human resource that assumes the risk of organizing other productive resources to produce goods and services.

One of the four basic categories of resources, or factors of production (the other three are labor, capital, and land).

An entrepreneur must be willing to take a RISK in pursuit of a PROFIT.

Your Example: Your image:

EntrepreneurA risk-taker in search of profits; Starts new businesses or bring new products to market

17.) Trade-offs (guns or butter) All the alternatives that we give up whenever we choose one course of action over

another. Guns and butter refers to a famous model explaining the relationship between 2 goods that are important for a nation's economic growth.

It models the relationship between a nation's investment in defense and civilian goods. In this model, a nation has to choose between two options when spending its finite resources. It can buy guns, butter, or a combination of both. This relationship represents a country's choices between defense and civilian spending in more complex economies.

In short, a country that decides to produce more military goods (“guns”) has fewer resources to devote to consumer goods (“butter”) and vice versa. (Remember, resources are limited!)

The steel used to make a tank is no longer available for building the dairy equipment need to make butter.

Your Example:

Your image:

18.) opportunity cost The highest valued alternative foregone (given up) in the pursuit of an activity

and when a choice is made.

This is a hallmark of anything dealing with economics--and life for that matter--because any action that you take prevents you from doing something else.

The ultimate source of opportunity cost is the pervasive problem of scarcity (unlimited wants and needs, but limited resources). Whenever limited resources are used to satisfy one want or need, there are an unlimited number of other wants and needs that remain unsatisfied.

Herein lies the essence of opportunity cost. Doing one thing prevents doing another.

The true cost of something is what you give up to get it. This includes not only the money spent in buying (or doing) the something, but also the economic benefits (UTILITY: Economist-speak for a good thing; a measure of satisfaction) that you did without because you bought (or did) that particular something and thus can no longer buy (or do) something else.

O.P. continued…

For example, the opportunity cost of choosing to train as a lawyer is not merely the tuition fees, PRICE of books, and so on, but also the fact that you are no longer able to spend your time holding down a salaried job or developing your skills as a footballer.

These lost opportunities may represent a significant loss of utility (Economist-speak for a good thing; a measure of satisfaction).

Going for a walk may appear to cost nothing, until you consider the opportunity forgone to use that time earning money.

Everything you do has an opportunity cost .

ECONOMICS is primarily about the efficient use of scarce resources, and the notion of opportunity cost plays a crucial part in ensuring that resources are indeed being used efficiently.

Your Example:

Your image:

19.) Thinking at the margin:

When economists look at decision, they point out one more characteristic in addition to opportunity cost. Many decisions involve adding one unit or subtracting one unit, such as one minute or one dollar.

From an economist’s point of view, when you decide how much more or less to do, you are thinking on the margin.

It means to think about your next step forward. The word "marginal" means "additional." The first glass of lemonade on a hot day quenches your thirst, but the next glass, maybe not so much. If you think at the margin, you are thinking about what the next or additional action means for you.

How many additional tomatoes can you get by taking better care of your garden?

If an hour extra work weeding means you will get 12 more tomatoes,

then one additional hour of work results

in 12 additional tomatoes.

Economists sometimes summarize that by saying your marginal product of labor is 12. That just means you can get 12 more tomatoes for one additional hour of work.

On the flip side of that, you could equally well say

that the marginal cost of a producing one additional tomato is 5 additional minutes (1/12th of an hour) of your labor.

Every new tomato

costs you

another five minutes of weeding.

As another example, if one additional Facebook friend costs you an additional 10 minutes of your attention…

Then what is the marginal cost?

the marginal cost is 10 minutes of your time per new Facebook friend.

Your Example:

Your image:

20.) efficiency Requires that resources go towards their most socially optimal

use: those who value something most end-up getting that which they value. (using resources in a such a way as to maximize the production or output of goods and services)

Your Example: Your image:

21.) equity Fairness Your Example: Your image:

22.) production possibilities curve/graph (PPC) Shows alternative ways to use an economy’s

productive resources. It illustrates the production possibilites for the economy.

Your Example:

Your image:

(You will want to use my on-line notes or the internet to help you with a correct image)

The axes of the graph can show categories of goods and services, such as categories of goods and services, (farm goods and factory goods) or any pair of specific goods or services (guns and butter)

23.) Production possibilites frontier The line on a production

possibilities graph that shows the maximum possible output (production) for a specific economy.

Producing on the curve means resources are fully employed, while producing inside the curve means resources are unemployed. The law of increasing opportunity cost is what gives the curve its distinctive convex shape

Production Possibilities Frontier

Model used to illustrate opportunity costs

Shows maximum combinations of goods and/or services an economy can produce when all productive resources are fully employed

Your Example:

Your image:

(You will want to use my on-line notes or the internet to help you with a correct image)

Guns v. Butter

A – 100 Butter, 30 Guns

B – 50 Butter, 120 Guns

C – Overuse of resources (temporary)

D – Resources not fully employed

24.) law of increasing costs: As production switches from one item to another

(for example, from guns to butter), more and more resources are necessary to increase production of the second item (butter). Therefore, the opportunity cost increases.

The law of increasing costs explains why production possibilities frontiers usually curve.

As we move along the curve, we trade off more and more to get less and less additional output.

This "law" can be seen in the production possibilities schedule and is illustrated graphically through the slope of the production possibilities curve. It generates the distinctive convex shape of the curve, making it flat at the top and steep at the bottom.

Your Example:

No image necessary for this vocab. Word

25.)Value refers to something that has a worth that can be expressed in dollars and

cents

What gives something value? Scarcity

Utility – usefulness of a product

Utility can vary from person to person

A baseball card may have value to someone but to another have little or no value.

Which of these items has utility to you?

Which one is more essential to you?Which one is more valuable to you?

Water Diamonds

Water-Diamond Paradox

Water is essential for life, yet has little value

Diamonds is NOT essential for life; yet has value

WHY? Diamonds are scarce and water (in most parts of the world) is plentiful

Your Example:

Your image: